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FEDEX COMPANY

PREPARED FOR:

PhD Pham Quoc Khanh (lecturer)

PREPARED BY

Do Viet Dung – Casper

ITP F04 – 037

SUBMISSION DATE:

8th January, 2013

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TABLE OF CONTENTS

INTRODUCTION...........................................................................................................................3

LO3. UNDERSTAND APPROACHES TO STRATEGY EVALUATION AND SELECTION. .4

1. Analyze possible alternative strategies relating to substantive growth, limited, growth or retrenchment.................................................................................................................................4

a. Five years objectives.........................................................................................................4

b. The stages for five years...................................................................................................4

c. Alternatives for FedEx’s strategies...................................................................................5

2. An appropriate future strategy for FedEx.............................................................................8

a. Analysis of suitability.......................................................................................................8

b. Analysis of feasibility.......................................................................................................9

c. Analysis of stakeholder’s Acceptability...........................................................................9

d. Analysis of risk...............................................................................................................10

e. Score and ranking............................................................................................................11

f. Selection and improvement.............................................................................................11

LO4. UNDERSTAND HOW TO IMPLEMENT A CHOSEN STRATEGY...............................12

3. Compare the roles and responsibilities for strategy implementation..................................12

a. Sub-objectives or targets.................................................................................................12

b. Activities to archive each target and department to carry out each activity...................12

4. Evaluate resources requirement to implement a new strategy for FedEx..........................15

5. Target and timescales for achievement in FedEx to monitor a given strategy...................18

a. Action plan for each department in line with objectives of different stages...................18

b. Measurement...................................................................................................................21

CONCLUSION..............................................................................................................................22

REFERENCES..............................................................................................................................22

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INTRODUCTION

This report is about the various approaches to strategy evaluation and selection which are

applicable to FedEx Company. Firstly, the report will provide to FedEx possible alternatives for

FedEx’s strategies which can be used to archive five year objectives of FedEx which are limited

growth, substantive growth, and retrenchment growth strategy. After that, the report will evaluate

these alternative strategies base on the analysis of suitability, feasibility, stakeholders’

acceptability, and risk. Thus, the report shows how to implement a chosen strategy through the

roles and responsibilities for strategy, resources requirements and targets and timescales for

achievement.

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LO3. UNDERSTAND APPROACHES TO STRATEGY EVALUATION AND

SELECTION

1. Analyze possible alternative strategies relating to substantive growth, limited,

growth or retrenchment

a. Five years objectives

The vision of FedEx Company is make it possible for people and business to connect and

collaborate with each other, no matter where they in the world and FedEx’s mission is

producing superior financial return for its shareowners through provide high value-added

logistic, transportation and related business services by focused operating companies. In

addition, FedEx also has to meet customer requirement based in the highest quality manner

appropriate to each market segment served and FedEx will strive to develop mutually

rewarding relationships with its employees, partners and suppliers. Based on that, FedEx

actually set up the objectives for the next 5 year which is expanding the business to the new

markets and bring to customers perfect services to make FedEx’s express and

transportation service is the first choice of customers based on that increase profit 18% at

the end of 2017.

The objectives of FedEx will be evaluated based on SMART technique

Specific Measurable Achievable Relevant TimetableEvaluation

YES YES YES YES YES

b. The stages for five years

To make the effective of objectives is highest, FedEx actually divide the completed time

objectives to three stages. The first stage is three years (2013 to 2015), in this time FedEx

will increase its revenue by 10 percent annually based on the increase of sales and

customers and the second stage (2016) will be for completing the growth of the market

share in all the market by 8 percent. The last stages (2017) will be the time FedEx creates

new alliances and services for new markets leads to the expansion of the business of

FedEx.

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c. Alternatives for FedEx’s strategies

Limited growth

Market penetration: The growth which based on the market penetration is not related to the

business activities of the company in new market or creating new products/ services. It is a

strategy in which the company can increase market share using current products or services

(Clark, n.d.). For example with the case of FedEx Company, FedEx may provide lower

price of services, good quality of service and also using the promotion in order to advertise

the existing services. Thus, FedEx can improve the competitive ability to compete with

competitors to attract new customers and also increase the use of current customers.

Product development: By creating new products/ services to serve the same market the

company can provide these new products/ services to existing customers and grow the

business of the company without tapping new markets. With the case of FedEx, continuing

the FedEx commitment to the pursuit and development of technologies, FedEx will strive

to provide innovative solutions and services for customers (FedEx Coporation, n.d.). Based

on that, FedEx will have the advantages in the competition with its competitor but it also

make the competition is harder because it leads to the innovation of competitors.

Market development: It involves introducing the company products/ services to new

markets. For example, FedEx can enter a new country, a new city, and even targeting a

market segment. Thus, FedEx could attract more new customers and make a good image in

customers’ mind. But market development strategy will take higher cost and more time

from FedEx.

Substantive growth

Substantive growth strategy includes four main types which are horizontal integration,

vertical integration, related and unrelated diversification. Furthermore, substantive growth

strategy is frequently implemented through acquisition, merger or joint venture rather than

organic growth. (Thompson, 2001)

Horizontal integration: it is a strategy in which the company can increase its market share

by taking over a similar company in the market. Furthermore, this merger can be made in

the same geography or probably in other countries to increase the number of customers

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(Anon., n.d.). For the case of FedEx, horizontal integration can help FedEx holds more

market share and make more profit in the new markets even old markets. On the other

hand, horizontal integration will be a good way for FedEx completes the objective of

increasing 10% revenue annually from 2013 to 2015 and also increase the market share of

all the markets (2016) while FedEx has more market share.

Vertical integration: It is the process based on that the company can control some steps of

the production or distribution of the product or service in order to increase the company’s

or entity’s power in the market place (Anon., n.d.). For example, by using vertical

integration FedEx can reduce the transportation cost by building a hub in the airport where

the packages are sorted based on their destinations and after that the packages will stay at

the hub until they are delivered by plane, improve supply chain coordination, or increase

entry barriers to potential competitors.

Related diversification: the company can develop the old product or service to new ones

and there is a relationship between existing product/ service and new product/ service.

Unrelated diversification: There is no discernible relationship between existing and new

products, services and markets. The main advantage of unrelated diversification is make

high financial benefits and profits from the new investment and for the case of FedEx;

unrelated diversification can is the way for FedEx can get the third stage of objective

(2017) which is creates new alliances and services for new markets leads to the expansion

of the business of FedEx.

Conclusion: Substantive growth strategy is a perfect strategy for FedEx because depend

on it FedEx can complete all stages of five years objectives and the only work for FedEx is

considering how to use unrelated diversification, horizontal integration and vertical

integration in the highest effective way.

Retrenchment strategies

While corporate strategies prefer finding ways to expand business, they often face tough

economic times and need a more conservative approach. The retrenchment strategy

provides corporation a chance to regroup, preserving resources for the greater good and it

includes divestment, bankruptcy, and liquidation. Honestly, the retrenchment strategy is not

matched for FedEx Company in order to complete the five year objectives.

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Alternative strategies for FedEx’s stages

Alternative strategies

Stage 1 Stage 2 Stage 3

Limited growth By using market penetration, FedEx can attract new customers and make the use of current customers increase so make the revenue of FedEx increase.By using market development, FedEx also could attract more new customers and make a good image in customers’ mind by introducing new services to new markets

Based on market penetration, the market share of FedEx will increase.

Based on the product development, FedEx can create new alliances and services for new markets leads to the expansion of the business of FedEx.

Substantive growth strategy

By using horizontal integration FedEx holds more market share and make more profit in the new markets even old market and vertical integration help FedEx reduces the cost

FedEx should use horizontal integration because when FedEx merges with a local similar company of the foreign market; FedEx can take advantage of the reputation of this local company to increase the market share.

By using unrelated diversification FedEx will can make new product/ service or develop existing product/ service for new markets in order to expand its business

Figure 1: Alternative strategies for FedEx’s stages

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2. An appropriate future strategy for FedEx

a. Analysis of suitability

Alternative strategies Suitability

Limited growth To complete the first stage of five year objective from 2013 to

2015 and the second ones, FedEx can introduce the services to the

new customers in new markets such as Vietnam, Lao, and other

countries in South East Asia through market development in order

to attract more potential customers. Furthermore, introducing its

services should goes with the promotion FedEx will send a small

gift for potential customers who usually purchase its services. On

the other hand, FedEx will use competitive price in existing

services to increase the use of current customers. But besides that,

FedEx also should consider about the cost of strategy because

market penetration will take lower cost and shorter time than

market development.

About the third stage (2017), product development is objectives

of the third stage FedEx provide new services to customers but it

is quite of expensive and take a long time to develop the services.

Substantive growth In the first stage and second stage of FedEx, by merging similar

local companies in the foreign markets FedEx can get the trust of

customers of foreign countries and reduce the risk of loss from

the different about traditional, culture, and even customers’ think

from that there is more market share and more profit for FedEx.

About the third stage of FedEx, there is more risk for FedEx when

it joins in new fields through new service and new markets.

Because of new service and new markets so there are not many

customers know and trust the service of FedEx.

Figure 2: Analysis of suitability

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b. Analysis of feasibility

Alternative strategies Feasibility

Limited growth Financial Management: it is easy for FedEx management to

balance existing operations as well as managing expansion into

new markets when FedEx uses limited growth because the

financial and logistic challenges of rapid growth are usually too

complicated for even skilled managers to handle in the effective

way. (Richards, n.d.)

Human resources: FedEx does its business through more than

200,000 staffs that have good skills and professional behavior so

it leads to FedEx can make a good image in customers’ mind.

Furthermore, it is easy for FedEx completes promotion works and

develop services based on its staffs.

Substantive growth External relation and partnerships: based on the good external

relationship and the correlation relationship with partners, it is

easier for FedEx merges other companies.

Technologies: By improving the technologies innovation, FedEx

also can create new services for new markets.

Figure 3: Analysis of feasibility

c. Analysis of stakeholder’s Acceptability

Alternative strategies Stakeholder’s Acceptability

Limited growth If FedEx Company uses limited growth strategy, FedEx can avoid

the massive debt that often accompany rapid growth strategy

furthermore, this debt will be very costly especially when

FedEx’s sales are not high as expected.

Thus, banks are interested with the financial situation of FedEx so

FedEx can get the support from banks.

When FedEx introduces the services to the new customers in new

markets and gives them the competitive prices so FedEx could get

the trust of customers and they will accept the brand of FedEx.

Substantive growth By improving the technologies innovation, FedEx can create new

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services in better way so FedEx will create good image in

customers’ mind.

Furthermore, the greatest advantage of substantive growth

strategy is the fact that it will lead to more growth in the future

and wealth tends to growth exponentially. Thus, FedEx will have

high return on investment and strong financial position.

Through the achievement of substantive growth, FedEx not only

bring benefit to its owner and employees but also increasing the

wealth of society at large. Thus, FedEx will get the loyalty of its

employees and the support from the government.

Figure 4: Analysis of stakeholders’ acceptability

d. Analysis of risk

Alternative strategies Potential risk

Limited growth Economic risk: When using limited growth strategy, the

competitors of FedEx may be able to take market share by

adopting their own rapid growth strategies. FedEx will have to

face the competitive challenges from its competitor to maintain

and increase its market shares.

Financial risk: in general way most of investors and shareholders

are primarily interested in a limited duration for their investment

no more than few years. They want to take the profit from their

investment so the manager of FedEx who use the limited growth

strategy could face the substantial pressure from them to grow

FedEx quickly.

Substantive growth Risk from the different of culture, traditional and economic

situation in foreign markets: when FedEx joins in the new

markets FedEx may have some problems from economic situation

such as inflation rate or interest rate even the decision of

customers based on their culture and traditional.

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Political risk: FedEx has to consider about the rules which was

made by the government for example tax rules.

Figure 5: Analysis of risk

e. Score and ranking

Alternative strategies

Scores (1 – 10)Suitability Feasibility Acceptability Risks Total

Limited growth 9 9 9 8 35Substantive growth 8 8 9 6 33

Figure 6: Score and ranking

f. Selection and improvement

According to the score and ranking, it is easy to see that the limited growth strategy is

better than substantive growth strategies for FedEx Company. But FedEx also use the

substantive growth strategy in some special situations because it can bring exponentially

profits for FedEx. Furthermore, when FedEx wants to join in the new markets in order to

approach new potential customers FedEx needs to merge or take over a local company to

take advantage of the branch of the local company in order to build its good image in

customers’ mind. On the hand, the substantive growth strategy also helps FedEx controls

some part of production or distribution in order to reduce the cost.

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LO4. UNDERSTAND HOW TO IMPLEMENT A CHOSEN STRATEGY

3. Compare the roles and responsibilities for strategy implementation

a. Sub-objectives or targets

Stage 1: Increase the revenue by 10 percent annually from 2013 to 2015

Maintain the existing customers and increase the number of new potential

customers

Increasing the frequency of transactions per customer and make each of

customers use services more

Stage 2: Increase 8 percent of market share in all the market in the year 2016

Increase the market share in potential foreign markets such as Vietnam

Improve the competitive ability of FedEx to compete with other competitor

Stage 3: Crease new alliances and services for new markets in the year 2017

Invest more money in the process of improving technology innovation

Improve the quality of FedEx’s employees.

b. Activities to archive each target and department to carry out each activity

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Objectives Sub-Objectives Activities to archive the objectives Department to carry out the activities

Increase the

revenue by 10

percent

annually from

2013 to 2015

Maintain the existing

customers and increase

the number of new

potential customers

Increasing the frequency

of transactions per

customer and make each

of customers use

services more

Producing good services after sales for

customer and provide discount price,

gift to potential customers and old

customers to increase the loyal of

customers.

Using promotion activities to introduce

about FedEx’s services through

newspapers, magazines, the internet

and television in order to make more

new customers know about the service

of FedEx

Customer Support Department: in

which everything that related to

customers’ service will be solved. They

will ensure that customers always satisfy

with FedEx’s service.

Marketing Department: in which the

staffs of FedEx will create and complete

the projects that will be used for

introduce, advertise, and promote the

services of FedEx to customers.

Furthermore, marketing department will

ensure that FedEx has good reputation in

customers’ mind.

Increase 8

percent of

market share in

all the market

in the year

2016

Increase the market

share in potential

foreign markets such as

Vietnam

Improve the competitive

Making the new projects that will help

FedEx runs its business in new markets

in which there is only few or no

competition from other companies for

market share.

FedEx needs to advertise to customers

Business Planning Department: they

will have the responsibility to analyze the

research, cost and implication of an

investment from that make detailed

projects which helps FedEx can enter the

new markets.

Marketing Department:

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ability of FedEx to

compete with other

competitor

the information about services of

FedEx through the internet, television,

newspapers, and magazines to improve

the competitive of FedEx. Thus, FedEx

will have the advantage is the

competition for market share with other

competitors.

Crease new

alliances and

services for

new markets in

the year 2017

Invest more money in

the process of improving

technology innovation.

Improve the quality of

FedEx’s employees

By improving the technology

innovation, it is easier for FedEx to

create new services for new markets.

FedEx has to train its staffs to become

people who have good skills and

professional behavior after that FedEx

will divide them into development

teams in order to research for creating

new alliances and services

Development Department: They have

missions to improve the technologies

through innovation in order to meet the

requirement of customers.

Training Department: In which staffs

of FedEx will be trained to become most

skilled staffs and have professional

behavior these staffs can contribute new

ideas for creating new alliances and

services.

Figure 7: Activities to archive each target and Department to carry out each activity

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4. Evaluate resources requirement to implement a new strategy for FedEx

Sub-Objective Key activities to archive the objectives Resources for each activity

Maintain the existing

customers and increase

the number of new

potential customers.

Increasing the frequency

of transactions per

customer and make each

of customers use

services more

Producing good services after sales for

customer and provide discount price, gift to

potential customers and old customers to

increase the loyal of customers.

Using promotion activities to introduce about

FedEx’s services through newspapers,

magazines, the internet and television

Financial resources: FedEx will make an account

in which the amount of money will be used for

show the grateful of FedEx to potential customers

and old customers through gifts or discount prices

of services. FedEx should invest in this account

about 15 percent of the annual revenue for each

year; for example, the revenue of 2012 was $42

billion so the money FedEx should use for the

account is about $ 6.3 billion. It is not a big number

but it is necessary for show the grateful of FedEx to

potential customers. Besides that, FedEx also

should spend about $ 9billion to promotion

activities in the entire world.

Human resources: Furthermore, FedEx will have to

ensure the staffs in customer support department

and marketing department are enough in order to

support customers in the effective and fast way.

FedEx also needs to contract with newspapers,

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magazines and television for promotion activities.

To ensure this thing, FedEx should divide the

staffs in 2 departments in to small groups and each

of small group will undertake one step of works.

For example, FedEx will divide customer support

department into 3 groups and marketing department

into 4 groups.

Increase the market

share in potential foreign

markets such as Vietnam

Improve the competitive

ability of FedEx to

compete with other

competitor

Making the new projects that will help FedEx

runs its business in new markets

Advertising to customers the information about

services of FedEx through the internet,

television, newspapers, and magazines to

improve the competitive of FedEx so FedEx

will have the advantage is the competition for

market share with other competitors

FedEx will have to ensure about the quality of

staffs in business planning department, they

actually must be most skilled people and have

professional behavior. (Human resources). FedEx

should make a team includes examiners based on

them FedEx can choose and hire good staffs.

FedEx also needs to contract with newspapers,

magazines and television for promotion activities

based the human resources from marketing

department

Invest more money in

the process of improving

technology innovation.

Improving the technology innovation, it is

easier for FedEx to create new services for

new markets.

Financial resources and human resources: FedEx

has to have strong financial and a good department

for training employees to maintain the process of

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Improve the quality of

FedEx’s employees

FedEx has to train its staffs to become people

who have good skills and professional

behavior after that FedEx will divide them into

development teams in order to research for

creating new alliances and services

improving the technology innovation and after that

create new services for new markets. FedEx should

invest about $4 billion for the process of improving

the technology innovation.

Figure 8: Resources for each activities

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5. Target and timescales for achievement in FedEx to monitor a given strategy

a. Action plan for each department in line with objectives of different stages

Strategy stage 1

Department: Marketing, Customer Support

Objective Main activities Target Time

Maintain the existing

customers and increase

the number of new

potential customers.

Increasing the frequency

of transactions per

customer and make each

of customers use

The staff of Customer Support Department

will be divided into 2 main groups.

Group 1: They will have responsibilities to

receive customers’ requirement or complain

directly face to face in service center of FedEx.

Group 2: They have to answer customers’

questions through telephone center or the

official website of FedEx

Group 3: they have mission to communicate

with potential or old customers about the gift

or discount prices policy for them.

The Staff of Marketing Development will be

divided into 4 groups

Group 1: they are people who give the ideas

about marketing campaigns and after that they

Increasing the loyal of customers and

built good reputation of FedEx in

customers’ mind.

To make more new customers know

about the service of FedEx it leads to

the number of customers and also the

growth of profit

3

years

2 first

years

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services more will make these campaigns are detailed.

Group 2: They have responsibility that is

contacting directly to television, newspaper,

and magazines and after that make the

contract.

Group 3: they are people who determine the

target market which the promotion activities

aim to.

Group 4: They will hand the problems which

related to the financial of promotion activities

to ensure that the money invested into

promotion activities will be matched with the

financial situation of FedEx Company.

Figure 9: Strategy stage 1

Strategy stage 2

Department: Marketing, Business Planning

Objective Main activities Target Time

Increase the market

share in potential

foreign markets such as

Vietnam

FedEx will make a team which includes skilled

examiner who have experience in order to help

FedEx can hire good skilled and professional

behavior staffs who can work in Business

Planning Department to make new projects

Joining in the new markets in the easy

way to increase the market share.

4

months

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Improve the competitive

ability of FedEx to

compete with other

competitor

that help FedEx joined in effectively new

markets. Furthermore, FedEx divides Business

Planning Department into 2 teams.

Team 1: they will make research about

potential market through understanding about

the customers’ think, their culture and

traditional.

Team 2: they will evaluate the success ability

of project when it enters one new market, if the

success ability is high, FedEx will carry out

this project.

Using same activities with marketing

department in strategy stage 1

Improving the competitive of FedEx.

Thus, FedEx will have the advantage is

the competition for market share with

other competitors.

6

months

Figure 10: Strategy stage 2

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Strategy stage 3

Department: Training, and Development

Objective Main activities Target Time

Invest more money in

the process of improving

technology innovation.

Improve the quality of

FedEx’s employees

FedEx should invest about $4 billion for the

process of improving the technology

innovation.

Create short-term and long-term training

courses in which employees will be completed

their skills.

In these training courses, FedEx still pay

salaries for them to motivate them train harder

Make the process of creating new

services easier based on the support of

technology innovation

FedEx will divide them into

development teams in order to research

for creating new alliances and services

To support the process of creating new

alliances and services

1 years

8

months

Figure 11: Strategy stage 3

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b. Measurement

Firstly, in order to evaluate the success of five years objectives FedEx need measure the

effectiveness of the activities and the sub-objective which will be done by departments.

To measure the effectiveness of activities FedEx should consider about the activities are

completed at the deadline time or not and consider about how each department completed

sub-objectives. Thus, FedEx can complete the five years objectives only after when it

completes the departments’ objective. The measurement will be carried out based the

differences between real achievements and expected achievements such as in number of

customers, sales and market shares. Firstly, to know about FedEx achieves the objective

of stage 1 or not, they have to know the difference of the numbers of customers of

previous years and the frequency of transactions per customer through each of years. This

difference will show the effectiveness of departments such as customer support

department and marketing department in attracting new customers and maintaining

current customers. At the end of each year, the financial department of FedEx Company

will count the sales of the FedEx and if the sales increase it leads to the increase of

revenue and it also means that the objectives of marketing department, customer support

department were archived. The market share of FedEx will be measured based on the

increase of revenue, if the revenue increases it means that the market share increase and

the objective of business planning department was archived.

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CONCLUSION

This report is supported by the information which is from the internet, magazine and the course

book BPP Business Strategy. Based on that, FedEx will have good evaluation about the

alternative strategies and FedEx can choose one of these strategies for implementation.

REFERENCES

Anon., n.d. What is Vertical and Horizontal integration?. [Online]

Available at: http://bizdharma.com/blog/what-is-vertical-and-horizontal-integration/

Clark, W., n.d. Growth Strategies. [Online]

Available at: http://www.ehow.com/info_7748386_growth-strategies.html

FedEx Coporation, n.d. FedEx Innovation. [Online]

Available at: http://about.van.fedex.com/fedex-innovation

Lynch, W., n.d. What Is "Corporate Retrenchment Strategy"?. [Online]

Available at: http://www.ehow.com/info_7890404_corporate-retrenchment-strategy.html

Richards, L., n.d. Advantages & Disadvantages of Limited Growth Strategies. [Online]

Available at: http://www.ehow.com/info_8532268_advantages-disadvantages-limited-growth-

strategies.html

Sherman, F., n.d. Advantages & Disadvantages of Limited Growth Strategies. [Online]

Available at: http://smallbusiness.chron.com/advantages-disadvantages-limited-growth-

strategies-41321.html

Thompson, J. L., 2001. Understand Corporate Strategy. s.l.:s.n.

BPP, Business strategy course book 2012

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